Citigroup Inc., the biggest user of government debt guarantees extended under last year's bank rescue, plans to get out of the program as regulators push to withdraw aid intended as temporary, people familiar with the matter said.
Citi has been in discussions with the Federal Deposit Insurance Corp. over leaving the program when it expires Oct. 31, the people said. The banking company, which had $72.4 billion of FDIC-guaranteed debt outstanding as of June 30, does not plan to seek an emergency extension, one of the people said.
"There's substantially greater confidence now in Citigroup and other large banks," said Robert Albertson, head of investment strategy for Sandler O'Neill & Partners LP in New York. "I don't see why they need government support to fund themselves."
FDIC spokesman David Barr declined to comment, as did Danielle Romero-Apsilos, a Citigroup spokeswoman.
The FDIC's Temporary Liquidity Guarantee Program was set up last October after Lehman Brothers Holdings Inc.'s bankruptcy withered investor confidence in financial company bonds. Banks and other financial companies have sold $291 billion of bonds under the Temporary Liquidity Guarantee Program.
On Tuesday, Citi sold $5 billion of government-backed bonds with maturities of two and three years, according to Bloomberg data. Not including this week's sale, Citi has sold $44.6 billion of FDIC-guaranteed bonds this year, according to data compiled by Bloomberg. Citi has issued $13.4 billion of debt this year without guarantees.
Credit markets have improved so much that more investors are willing to buy Citi's debt without explicit government assurances, said David Hendler, an analyst at CreditSights Inc. in New York.
Citi still benefits from the perception that the government would step in if the company's financial condition deteriorated, he said.
"The credit shark's not there anymore," Hendler said. "When the environment's more constructive, everybody goes back in the pool."